Two companies look at the same house. One offers $240,000. The other offers $215,000. Almost every seller signs the $240,000 and stops thinking about it. Three weeks later, the $240,000 is $208,000 and the house has been off the market the whole time.
Here is the quick answer: a cash offer is not a price. It is a price plus the terms that decide whether that price survives to closing. Nearly every cash contract includes an inspection or due-diligence period, and during that window the buyer can renegotiate or terminate. The number you signed is a starting point, not a commitment.
This guide covers what that window actually gives a buyer, how a price cut happens step by step, the three questions that separate a real offer from a placeholder, and how to read earnest money as the honest signal it is.
Featured on Redfin: HomeWise was featured as an expert on Redfin, Powered by Rocket. Read the full article here: Cash-Offer Home Buyers Explained | Redfin. What follows expands on the advice we gave their readers.
What does the highest cash offer actually mean?
The highest cash offer means the highest number a company is willing to put on paper today, under terms that may let them change it later. It is a ceiling, not a floor. Until the inspection period expires, that price can move down. It almost never moves up.
A signed contract is not a signed check
Sellers hear “cash” and think “done.” Cash removes the lender, the appraisal, and the financing contingency. Those are real risks, and removing them is genuinely valuable. What cash does not remove is the buyer’s right to inspect the property and respond to what they find.
That right is written into the contract you sign. It is usually called the inspection period, the due-diligence period, or the option period depending on your state. Whatever it is named, it does the same job: it gives the buyer a defined window to look at the house and decide whether to proceed at the agreed price, ask for a different price, or leave.
Why the window exists in the first place
It is not inherently sinister. A buyer purchasing sight-unseen or off photos needs some way to verify what they are buying. Foundations move. Sewer lines collapse. A roof that looks fine from the driveway can be three layers deep and failing. A legitimate buyer uses the window to confirm what they already priced in.
The problem is that the same clause works just as well for a company that never intended to honor its number. Same paperwork. Completely different intent. You cannot tell them apart from the offer amount, which is exactly why the offer amount is the wrong thing to compare first.
What is a retrade, and why does it happen?
A retrade is when a buyer comes back after going under contract and asks for a lower price. Sometimes it is justified by something real they found. Sometimes it is the plan. The mechanics look identical from where you are sitting, which is the whole point.
The bid-high playbook
Here is how it runs. A company bids above what the house is worth to them, specifically to win the contract against buyers who priced it honestly. You sign. Your house comes off the market. They spend the inspection period shopping the contract to other investors or building a repair list.
Then, somewhere around day 14, the call comes. The foundation needs work. The comps came back soft. The number is now $208,000, and would you like to close Friday? By then you have told your family it is sold. Maybe you have put money down somewhere else. Maybe you have already started packing.
You lose leverage the day you sign
This is the part sellers underestimate. On the day you accept, you have every option available to you. You could take the other offer. You could list it. You could do nothing. Three weeks into a contract, most of those options have quietly closed. Other buyers have moved on. Your timeline has tightened. The cost of starting over now includes the three weeks you already spent.
A company that retrades is not betting you will like the new number. They are betting that restarting costs you more than the discount does. Usually they are right.
The highest offer and the best offer are rarely the same thing. Nearly every cash contract includes an inspection or due-diligence period. During that window, the buyer can renegotiate the price or terminate entirely. The number you signed is not a commitment, it is a starting point. Before you sign anything, ask how long the inspection period is, what specifically would cause the buyer to change the price, and how much earnest money you actually keep if they walk. A buyer who answers those three questions plainly is telling you the offer is real.
HomeWise, as published in Redfin’s Cash-Offer Home Buyers Explained
What three questions should you ask before signing?
Ask these three before you sign anything. They take about ninety seconds and they tell you more than any review page will. What matters is not only the answers, it is whether the person on the phone can give them without stalling.
- How long is the inspection or due-diligence period? You want a specific number of days, stated without hesitation. Shorter is better, because a shorter window means the buyer already did their work before making the offer. A long window on an aggressive number is a buyer keeping their options open at your expense.
- What specifically would cause you to change the price? A real buyer names things: undisclosed foundation movement, an unpermitted addition, a roof they could not see, a title issue. A buyer who says “we would have to see” or points vaguely at market conditions is telling you the price is negotiable by default.
- How much earnest money do I keep if you walk? This is the one that separates talk from money. Earnest money is the deposit the buyer forfeits if they fail to perform. It is often the only thing they are actually on the hook for. If the answer is nothing, or a token few hundred dollars, the offer costs them nothing to abandon.
Who is actually buying your house?
One more worth adding: are you the buyer, or are you assigning this contract to someone else? An assignable contract means the company on your paperwork may not be the company that shows up at closing. That is legal and common in wholesaling. It is also the mechanism behind most of the cash offers that fall apart, because the person who signed with you was never planning to buy.
Ask it directly. “Are you the end buyer?” A direct cash buyer says yes and can tell you where the funds are sitting. If the answer wanders, you are not negotiating with the buyer. You are negotiating with a middleman whose profit comes out of your price. That is worth knowing before you compare it against a direct offer.
How much earnest money should a cash buyer put up?
Enough that walking away hurts. There is no universal number, but the useful way to think about it is proportional: earnest money should be large enough that abandoning the deal costs the buyer real money relative to what they would save by squeezing you later.
What a token deposit actually buys
A few hundred dollars on a $240,000 house is not a deposit. It is a placeholder. It buys the buyer weeks of your time and control of your house for less than the cost of a weekend. Meanwhile you are carrying the mortgage, the taxes, the insurance, and the risk.
Flip it around and the test gets obvious. If the buyer walks on day 19, what did the whole episode cost them? If the honest answer is a few hundred dollars and an afternoon, then the cash offer they sent you was never a commitment. It was a reservation.
- Ask for the dollar amount in writing. Not a percentage discussed on a call. The number belongs in the contract.
- Ask when it goes hard. Earnest money that becomes non-refundable at the end of the inspection period is a real commitment. Money that stays refundable through closing is not.
- Ask where it is held. It should sit with a title company or attorney, never with the buyer. Ask which one, by name, before you sign.
- Ask what happens if they miss the closing date. A serious buyer has an answer. A tourist has an excuse ready.
Which offer actually nets more?
Run the two offers from the top of this article all the way to the wire, and the ranking flips. The higher number lost, and it lost by more than the $7,000 gap suggests, because it also cost five extra weeks of carrying the house.
| Term | Offer A: $240,000 | Offer B: $215,000 |
|---|---|---|
| Inspection period | 21 days | 7 days |
| Earnest money | $500, refundable | $10,000, hard after day 7 |
| Price change after inspection | Buyer’s discretion | Firm, no repair credits |
| Contract assignable | Yes | No, direct buyer |
| Title company named upfront | No | Yes |
| Price at closing | $208,000 | $215,000 |
| Days from signing to funds | 44 | 10 |
Illustrative example. Same house, two contracts, terms compared side by side.
Line up the terms, not the prices
This is the comparison that matters, and it is the one almost nobody makes, because the offer letter puts the price in bold and buries the terms. Line the terms up side by side and the picture usually resolves fast. If you want the broader version of this math against a traditional listing, we broke it down in cash offers versus traditional sales.
None of this means a higher cash offer is automatically a trap. Plenty of them are exactly what they look like. It means the price alone cannot tell you which kind you are holding, and the terms can.
Red flags that an offer is not real
None of these are proof on their own. Two or three together, and you are looking at a contract designed to be renegotiated.
- The offer is well above every other offer you got. Buyers underwriting the same house with the same data land in the same neighborhood. An outlier is usually a strategy, not a windfall.
- The inspection period is long and vague. Thirty days to look at a house someone already priced is thirty days to find a reason.
- Earnest money is tiny, refundable, or unmentioned. If leaving costs them nothing, leaving is always on the table.
- They cannot name the title company. A buyer who closes regularly has one. A buyer who does not will get back to you.
- Pressure to sign today. Expiring offers are a sales tactic. A real number is still a real number tomorrow.
- No proof of funds. Ask for it. A direct buyer sends it without a speech.
What does a real offer look like?
A real offer is boring. The price is defensible rather than exciting. The inspection period is short because the work was done before the number was sent. The earnest money is meaningful and it goes hard on a date you can point to. The title company has a name and a phone number. And when you ask why the price is what it is, you get the actual arithmetic instead of a compliment.
How to hold any buyer to it, including us
That is the standard we hold ourselves to, and it is the standard you should hold every cash buyer to, including us. If a house needs work and you would rather not touch it, that is a normal reason to sell as-is. If there is a deadline attached, whether that is a foreclosure date or a closing you have already committed to, read how selling before foreclosure works before you take the highest number in the pile.
And get more than one. Two or three cash offers cost you nothing but a few phone calls, and they are the only way to know whether the number in front of you is generous, ordinary, or bait. Put ours in the stack and ask us the same three questions you ask everyone else.
Source: HomeWise contributed expert commentary to Cash-Offer Home Buyers Explained | Redfin, published on the Redfin blog. Related reading: how to sell your house fast and what contingent means in real estate.
